The once quiet world of seed investing became frenetic a few years ago as dedicated seed funds and angel networks increased in scale and velocity. That environment has now crescendoed into the present world of the seed capital hurricane: funds galore, solo capitalists splurging streams of rolling-capital dollars wherever they can find a cap table crevice, crowdfunding cash sloshing around — and in the eye of the storm are the founders looking to just snag a term sheet for their companies and get back to work.
Into that maelstrom comes Index Ventures, which today announced the close and launch of a new $200 million dedicated seed investing vehicle it’s dubbed Index Origin. The fund’s name pays homage to the firm’s long-standing commitment to seed and first-check investing, where it has backed companies as diverse as Robinhood, Figma, Deliveroo and Wise (aka the rebranded TransferWise) at the seed state.
“Our view is that seed investing is truly the essence of venture capital,” said Nina Achadjian, a partner at Index who joined in early 2020. “It’s when you as an investor have to take the biggest leap of faith.”
She noted that the firm “in the last 18 months, I think we’ve made over almost 35 seed investments.” The new Index Origin fund would be a ramp up in terms of volume.
There’s extreme competition for cap tables at the earliest stages of startups today, and Index is focusing on a few offerings to maximize its sales pitch to founders.
The first emphasizes flexibility. Achadjian noted that there has been a sort of a devil’s bargain for founders on which type of funds to take at the seed stage. “Do you want a dedicated seed fund who is phenomenal at what they do, or do you want a multi-stage fund that might not have seed-specific resources but they can do a quick follow up [round],” she asked rhetorically. “There hasn’t really been the right product in the market to help founders have the best of both worlds, and so that was kind of our inspiration for Index Origin.”
Fitting its multi-stage thesis, all Index partners can write seed checks out of the new fund and they can invest in any vertical of interest to them in any geography (primarily the United States and Europe although it’s not explicitly limited to those markets). Achadjian noted that since the firm can potentially double down on later-stage rounds, the fund is more flexible in working with other firms, angels, and the whole coterie of funders at the seed stage.
That solves the capital component. As for providing more dedicated resources for seed founders, Index is offering a trilogy of programs to make it easier to scale businesses. They include a “First Hires” program designed to help with early hires at startups; an Early Adopter Network to help companies connect with potential design customers to find and accelerate product-market fit; and finally, The Index Network, an expert network of specialists (think DevOps, SalesOps, or technical architecture) that startup founders can consult on when they run into roadblocks. These programs and the seed fund writ large will have a dedicated team to help find and grow seed-stage companies.
“Our philosophy has been: we never say it’s too early for Index,” Achadjian said.
Part of the impetus for these new programs is the diverging mix of founders that have started companies in recent years. “We’ve actually found that a lot of founders, they used to have technical backgrounds, but in the last couple of years, it’s shifted to more business-background founders,” she said. That has meant helping these founders find technical talent and building up a network of technical expertise to help them grow.
Secondly, Index wants to increase the diversity of founders in its investment pipeline. “That’s another driver for why we wanted to do seed, because it gives us a broader access to the very, very top of funnel,” Achadjian explained. “I think if you want to make an impact for diversity, that’s actually the stage where you can make the biggest impact.”
Index’s approach matches that of Sequoia, which announced earlier this year that it raised $195 million for a seed fund, also focused on the U.S. and Europe. Most other firms in the multi-stage investing game tuck seed bets inside their early-stage funds, rather than creating standalone investing vehicles. With potentially dozens of checks to write in the coming months, expect to see Index bring even more activity into the white-hot seed market.